The Curse of Natural Resources in Fractionalized Countries

Roland Hodler

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: This paper develops a model that can explain why natural resources are a curse for some countries, but not for others. In this model, natural resources cause fighting activities between rivalling groups. Fighting reduces productive activities and weakens property rights, making productive activities even less attractive. The aggregate production decrease exceeds the natural resources' direct positive income effect if and only if the number of rivalling groups is sufficiently large. The model thus predicts that natural resources lower incomes in fractionalized countries, but increase incomes in homogenous countries. Empirical evidence that supports this hypothesis is provided

Keywords: Natural resources; Fractionalization; Rent seeking (search for similar items in EconPapers)
JEL-codes: Q32 D72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-mic
Date: Written
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Related works:
Journal Article: The curse of natural resources in fractionalized countries (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:ube:dpvwib:dp0404

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